The “Anti-Budget” Budget

The reason that I work with people on their budgets is not because I care how they spend their money, it is rather my aim is to help them maximize the use of their money based on their values and goals. There are some people who cannot stand tracking expenses. It positively drives them crazy. They have money in their pocket and they want to spend it however they want to spend it at the time. If you know someone like this who would still like to save and not have to worry about their future, let me suggest the “anti-budget” budget. Though it may not solve all problems financial, it will go a long ways towards building wealth.

Start with saving 15% of your income. If you have not saved before, increase this amount by 1% for every two years that you are older than 20. If you are fifty and have not saved a dime until this point, this means I will want you to begin saving 30% of your income, because the fact is you are running out of time to create a large enough nest egg for your future. Yes, if you have not saved before, this is going to mean a tremendous change to your lifestyle.  If you are riddled with high-interest debt, any amount of this that is not matched by your employer for savings needs to go towards paying off the debt first. You will probably need to save for at least 15 years or until full retirement age, whichever is greater using this method. The more and earlier you can save the better.

Estimate your taxes that you will have for the year and set aside funds that you will need to pay for your tax bill. If you are an employee this is often handled by your employer. If you are not, you will need to talk with your tax preparer and get some good advice on how much to plan to save so as not to be caught with late penalties, etc.

Put aside 10-20% of your income for an emergency fund and for long term expenses such as vacations, cars, etc. In my article on an introduction to cash, I wrote down some good ways to consider on how to save money.

For the religious or giving, you may need to budget 10-15% of your budget towards these beliefs.

For those of you who are doing the math in your head, perhaps you are saying, but this means I may have to live on two/thirds or less of my after-tax income! Yes, you may. And this may involve preparing your own meals more, taking on a roommate, living in a less expensive place, and buying used. You may have to seek additional sources of income whether working a part time job on the side or something else. The plan is simple. It is not necessarily easy.

The good news is that you can spend the remainder however you wish and probably be in decent shape for the future provided you have proper insurance in place.


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